According to the Permanent Income Hypothesis, a Temporary Increase in Income

question 407

Multiple Choice

According to the permanent income hypothesis, a temporary increase in income that does not affect average lifetime income would

• A)cause a large increase in consumption.
• B)cause no change in consumption.
• C)cause an increase in consumption and saving by the same amount.
• D)cause a decrease in consumption and saving by the same amount.

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Definitions:

Business Combination

The process of merging two or more companies into one, through acquisitions, consolidations, or other forms of restructuring.

Specific Criteria

Different or particular standards or requirements that must be met for a certain condition, action, or process to be initiated or considered valid.

Recognition

The formal acknowledgment in accounting that a transaction or event affects the financial statements of a company.

Separate Incorporation

The legal process of forming a new corporation that is distinct and separate from any owners or other entities.